What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-04-13 compared with 2020-03-27 · 311 added, 385 removed, 78 unchanged (90% of the section changed)

3 unchanged sentences

at the opening of business on October 6, 2017 under the symbol “BSTG.”

Prior to that time, our common stock traded

on the NASDAQ Capital Market also under the symbol “BSTG.”

From our initial public offering on October 21, 2013 until

April 1, 2016, in connection with our name change, our common stock traded on the NASDAQ Capital Market under the symbol “HART.”

There were 149 holders of record of our common stock as of March

Prior to that time, our common stock traded on the

NASDAQ Capital Market also under the symbol “BSTG.”

From our initial public offering on October 21, 2013 until April 1, 2016,

in connection with our name change, our common stock traded on the NASDAQ Capital Market under the symbol “HART.”

There were 155 holders of record of our common stock as of April 8,

2021, which does not include persons or entities that hold their stock in nominee or “street”

name through various

brokerage firms.

name through various brokerage

We believe that the number of beneficial owners of our common stock at that date was substantially greater.

Dividend Policy

We have never declared or paid cash dividends on our common

stock in the past and do not intend to pay cash dividends on our common stock in the foreseeable future.

Any future determination

to pay cash dividends will be at the discretion of our Board of Directors and will depend on our financial condition, results of

operations, capital requirements and other factors our Board of Directors deems relevant.

We have never declared or paid cash dividends on our common stock in

the past and do not intend to pay cash dividends on our common stock in the foreseeable future.

Any future determination to pay cash dividends

will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements

and other factors our Board of Directors deems relevant.

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2019, in addition

to unregistered sales we previously disclosed in our Quarterly Reports on Form 10-Q or in Current Reports on Form 8-K in relation

to the applicable periods, we also completed the following transactions under the Securities Act of 1933 (the Securities Act)

in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering

and Rule 506 promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under

applicable state laws.

On or about September 30, 2019, we sold a total of 30,000 shares of our common stock to a group of investors in connection

with the assignment and exercise of 30,000 warrants, which were previously issued on December 27, 2017, at a purchase price of

$2.00 per share.

On or about November 11, 2019, we sold a total of 75,000 shares of our common stock to Connecticut Children’s Medical

Center in connection with the exercise of a total of 75,000 warrants, which were previously issued on January 3, 2018, at a purchase

price of $2.00 per share.

During the fiscal year ended December 31, 2020, in addition to unregistered

sales we previously disclosed in our Quarterly Reports on Form 10-Q or in Current Reports on Form 8-K in relation to the applicable periods,

we also completed the following transactions under the Securities Act of 1933 (the Securities Act) in reliance on the exemptions provided

by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506 promulgated under the Securities

Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.

Selected Financial Data.

2 unchanged sentences

Forward-Looking Statements

The following section of this Annual Report on Form

10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

contains statements that are not statements of historical fact and are forward-looking statements within the meaning of

federal securities laws.

These statements involve known and unknown risks, uncertainties and other factors that may cause our

actual results, performance or achievements to be materially different from any future results, performance or achievements

expressed or implied by the forward-looking statements.

These statements reflect our current views with respect to future

events and are based on assumptions and subject to risks and uncertainties.

In some cases, you can identify forward-looking statements

by terms such as “believe,”

The following section of this Annual Report on Form 10-K entitled

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

contains statements that are

not statements of historical fact and are forward-looking statements within the meaning of federal securities laws.

These statements involve

known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially

different from any future results, performance or achievements expressed or implied by the forward-looking statements.

These statements

reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.

In some cases, you can identify forward-looking statements by terms

such as “believe,”

“may,”

24 unchanged sentences

“permit”

and similar expressions intended to identify

forward-looking statements.

These statements reflect our current views with respect to future events, are based on assumptions

and are subject to risks and uncertainties.

Given these uncertainties, you should not place undue reliance on these forward-looking

We discuss many of these risks in greater detail in Item 1A.“Risk Factors”

of this Annual Report on Form

You should carefully review all of these factors, as well as the comprehensive discussion of forward-looking statements on

page 1 of this Annual Report on Form 10-K.

We are a biotechnology company developing bioengineered organ

implants based on our novel technology.

Our technology is comprised of a proprietary biocompatible scaffold, which is the foundation

of our Cellframe TM technology, that is seeded with the recipient’s own mesenchymal stromal cells to form our Cellspan TM

and similar expressions intended to identify forward-looking statements.

These statements

reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties.

uncertainties, you should not place undue reliance on these forward-looking statements.

We discuss many of these risks in greater detail

in Item 1A.“Risk Factors”

of this Annual Report on Form 10-K.

You should carefully review all of these factors, as well as

the comprehensive discussion of forward-looking statements on page 1 of this Annual Report on Form 10-K.

We are a biotechnology company developing bioengineered organ implants

based on our novel technology.

Our technology is comprised of a proprietary biocompatible scaffold, which is the foundation of our Cellframe TM

technology, that is seeded with the recipient’s own mesenchymal stromal cells to form our Cellspan TM

implant, combining the clinically proven principles of tissue engineering, cell biology and materials science.

This technology

is being developed to treat life-threatening conditions of the esophagus, trachea and bronchus with the objective of dramatically

improving the treatment paradigm for those patients.

believe our technology will provide surgeons with new ways to address damage to the esophagus, bronchus, and trachea due to congenital

abnormalities, diseases, infections and traumas.

Products being developed based on our technology for those indications are called

Cellspan TM products.

We announced favorable preliminary pre-clinical results of large-animal

studies for the esophagus, trachea and bronchus in November 2015.

Since then, the Cellspan Esophageal Implant (CEI) product candidates

have been our lead development product candidates.

At this time our resources have been primarily focused on pursuing a development

program that addresses conditions of the esophagus:

esophageal atresia in pediatric patients and esophageal disease in adult patients.

Our Cellspan esophageal product candidate is intended to provide a surgical solution to stimulate regeneration of a segment of

the esophagus missing due to a congenital abnormality or following surgical removal, to establish or reestablish the organ’s

This technology is being

developed to treat life-threatening conditions of the esophagus, trachea and bronchus with the objective of dramatically improving the

treatment paradigm for those patients.

We believe our technology will provide surgeons with new ways to address

damage to the esophagus, bronchus, and trachea due to congenital abnormalities, diseases, infections and traumas.

Products being developed

based on our technology for those indications are called Cellspan TM products.

Esophageal Implant (CEI) product candidates have been our lead development product candidates.

At this time our resources have been primarily

focused on pursuing a development program that addresses conditions of the esophagus:

esophageal atresia in pediatric patients and esophageal

disease in adult patients.

Our Cellspan esophageal product candidate is intended to provide a surgical solution to stimulate regeneration

of a segment of the esophagus missing due to a congenital abnormality or following surgical removal, to establish or reestablish the organ’s

continuity and integrity.

Approximately one in 4,000 infants in the U.S.

esophageal atresia, a congenital condition where the child’s esophagus is underdeveloped and does not extend completely from

the mouth to the stomach.

When a long segment of the esophagus is lacking, the current standard of care is a series of surgical

procedures where surgical sutures are applied to both ends of the esophagus in an attempt to stretch them together so they can

be connected at a later date.

This process can take weeks and the procedure can result in serious complications and may carry high

rates of failure.

Such approach also requires, in time, at least two separate surgical interventions.

Other options include the

use of the child’s stomach that would be pulled up, or a piece of the patient’s intestine that would be moved to the

gap, to allow a connection to the mouth.

We are working to develop a CEI product candidate to address newborns’

atresia, to provide a simpler, more effective and potentially organ-sparing solution.

A portion of all patients diagnosed with esophageal diseases,

infections traumas or congenital abnormalities are treated via a surgical procedure known as an esophagectomy.

The current standard

of care for an esophagectomy requires a complex surgical procedure that involves moving the patient’s stomach or a portion

of their colon into the chest to replace the portion of esophagus resected by the removal of the tumor.

These current procedures

have high rates of complications, can lead to a severely diminished quality of life and require costly ongoing care.

to simplify the procedure, reduce complications, result in a better quality of life and reduce the overall cost of these patients

to the healthcare system.

In May 2016, we reported an update of results from pre-clinical

large-animal studies.

We disclosed that the study had demonstrated in a predictive large-animal model the ability of Biostage Cellspan

organ implants to successfully stimulate the regeneration of sections of the esophagus that had been surgically removed for the

This study and its results were published in an article in Nature Scientific Reports in March 2018.

CEIs, consisting of

a proprietary biocompatible synthetic scaffold seeded with the recipient animal’s own cells, were surgically implanted in

place of the esophagus section that had been removed.

Study animals were returned to a solid diet two weeks after

implantation surgery.

The scaffolds, which are intended to be in place only temporarily, were later retrieved via the animal’s

mouth in a non-surgical endoscopic procedure.

After two and a half months post-surgery, a complete epithelium and other specialized

esophagus tissue layers were regenerated.

Animals in the study demonstrated weight gain and appeared healthy and free of any significant

side effects, including two that were studied for almost two years and received no specialized care.

In November 2016, we were granted Orphan Drug Designation for

our CEI by the U.S.

Food and Drug Administration (FDA) to restore the structure and function of the esophagus subsequent to esophageal

damage due to cancer, injury or congenital abnormalities.

esophageal atresia to provide a simpler, more effective and potentially organ-sparing solution.

A portion of all patients diagnosed with esophageal diseases, infections

traumas or congenital abnormalities are treated via a surgical procedure known as an esophagectomy.

The current standard of care for an

esophagectomy requires a complex surgical procedure that involves moving the patient’s stomach or a portion of their colon into

the chest to replace the portion of esophagus resected by the removal of the tumor.

These current procedures have high rates of complications,

can lead to a severely diminished quality of life and require costly ongoing care.

Our CEIs aim to simplify the procedure, reduce complications,

result in a better quality of life and reduce the overall cost of these patients to the healthcare system.

In November 2016, we were granted Orphan Drug Designation for our CEI

Food and Drug Administration (FDA) to restore the structure and function of the esophagus subsequent to esophageal damage

due to cancer, injury or congenital abnormalities.

Orphan drug status provides market exclusivity in the U.S.

years from the date of the product’s approval for marketing.

This exclusivity is in addition to any exclusivity we may obtain

due to our patents.

Additionally, orphan designation provides certain incentives, including tax credits and a waiver of the Biologics

License Application (BLA) fee.

for seven years from the

date of the product’s approval for marketing.

This exclusivity is in addition to any exclusivity we may obtain due to our patents.

Additionally, orphan designation provides certain incentives, including tax credits and a waiver of the Biologics License Application

We also intend to apply for Orphan Drug Designation for our CEI in Europe in the future.

drug status in Europe provides market exclusivity there for ten years from the date of the product’s approval for marketing.

We are conducting Good Laboratory Practice (GLP) studies to

demonstrate that our technology, personnel, systems and practices are sufficient for advancing into clinical trials.

studies are required to advance to an Investigational New Drug (IND) application with the FDA, which would seek approval to initiate

clinical trials for Biostage CEIs in humans.

In October 2016, we announced a regulatory update following

our planned pre-Investigational New Drug (pre-IND) meeting with the FDA, for the advancement of our lead product candidate, a CEI

to be used to stimulate esophageal regeneration following surgery to address esophageal cancer in adults, into human clinical studies.

We subsequently announced our expectation at that time that we would file an IND application with the FDA in the third quarter

of 2017 based on our election to extend the duration of our ongoing GLP animal studies following the feedback provided by the FDA.

In October 2018, we submitted a follow-up package to the FDA summarizing three additional GLP preclinical studies and an FDA approved

first-in-human use of our CEI.

On August 7, 2017, we announced the use of our CEI product candidate

in a patient at a major U.S.

hospital via an FDA-approved single-use expanded access application.

The patient was a 75-year-old

male with a life-threatening cancerous mass in his chest that spanned his heart, a lung and his esophagus.

The surgery was performed

in May 2017 to remove the tumor, repair the heart, part of one lung, and a section of the esophagus.

The CEI was inserted into

the gap in the esophagus created by the removal of the tumor.

In February 2018 the patient’s surgeon informed us that the

patient had died after living approximately eight months after surgery.

The surgeon stated that the cause of death was stroke,

and that the stroke was unrelated to the esophageal implant.

The surgeon also informed us that a preliminary autopsy had shown

that the esophageal implant resulted in a regenerated esophageal tube in the patient, except for a very small (approximately 5mm)

hole on the lateral wall that was right up against a synthetic graft inserted as part of the patient’s heart repair on the

pericardium in that same surgery.

The synthetic graft on the pericardium was not related to our esophageal implant product and

may have acted as an irritant to esophageal regeneration where it contacted the esophageal implant.

The surgeon also informed us

that the esophageal regeneration in this patient was consistent with the regeneration previously observed in our large-animal studies.

On January 28, 2019 we announced that the surgeon revealed for the first time the details of a single-patient case report that

describes the use of new technology to repair the patient's esophagus following esophageal reconstruction associated with the removal

of a tumor mass in the chest and noted the segment of the patient's esophagus was successfully reconstructed.

This demonstrated

that segmental esophageal reconstruction using a stem cell-coated implant can facilitate reconstruction, regrowth and regeneration

of a gastrointestinal tissue in a human patient.

In August 2017, we announced that we were reprioritizing our

product development program based on greatest unmet medical need, analysis of existing surgical options, and physician validation.

We believe that receiving regulatory approval to treat pediatric esophageal atresia with our CEI product candidate may provide

a shorter time to a commercial product and the greater overall potential value.

Additionally, approval of our pediatric esophageal

atresia product candidate may result in receipt of a priority review voucher, which if achieved, could potentially provide significant

value to us in the future.

In October 2019, we filed an IND application with the FDA to

treat patients with esophageal disease, absent of cancer, in adults that would require a short segment esophageal implant following

clinically indicated short segment resection of the thoracic esophagus with our CEI product candidate.

In November 2019, we received

notice from the FDA placing our IND on clinical hold and providing a preliminary list of clinical hold and non-clinical hold questions.

In December 2019, we received the formal letter with clinical hold and non-clinical hold questions and submitted our response to

the clinical hold questions on February 18, 2020.

On March 19, 2020, the FDA notified us that the IND for our CEI product candidate

has been removed from clinical hold and that we can proceed with our study.

This FDA approval enables us to start our transition

to a clinical-stage biotechnology company, and start clinical planning, engaging with a clinical research organization and site

readiness in advance of starting the clinical trial for our CEI product candidate.

We were incorporated and commenced operations on November 1,

2013 as a result of a spin-off from Harvard Bioscience, Inc.

Orphan drug status in Europe provides

market exclusivity there for ten years from the date of the product’s approval for marketing.

In October 2019, we filed an IND application with the FDA to treat

patients with esophageal disease, absent of cancer, in adults that would require a short segment esophageal implant following clinically

indicated short segment resection of the thoracic esophagus with our CEI product candidate.

In November 2019, we received notice from

the FDA placing our IND on clinical hold and providing a preliminary list of clinical hold and non-clinical hold questions.

2019, we received the formal letter with clinical hold and non-clinical hold questions and submitted our response to the clinical hold

questions on February 18, 2020.

On March 19, 2020, the FDA notified us that the IND for our CEI product candidate has been removed from

clinical hold and that we can proceed with our study.

This FDA approval enables us to start our transition to a clinical-stage biotechnology

company, and start clinical planning, engaging with a clinical research organization and site readiness in advance of starting the clinical

trial for our CEI product candidate.

On May 7, 2020, we submitted responses to certain non-clinical hold questions and finalized a majority

of remaining non-clinical hold responses in the third quarter of 2020, and submitted the remaining responses in the fourth quarter of

2020, except for responses to our clinical trial details that we will submit once a clinical research organization is selected.

pandemic could adversely impact our business, including planned clinical trials, as discussed elsewhere in this document.

formed a subsidiary in Hong Kong, Harvard Apparatus Regenerative Technology Limited, as we continue to assess the market and regulatory

approval pathway in China as to our implant products.

We are not certain at this time as to which market, including U.S.

example, may provide the most viable initial pathway for regulatory approval to a commercial product.

This will depend on a number of

factors, including the approval and development processes, related costs, ability to raise capital and the terms and conditions thereof,

as well as the ongoing impact of the COVID-19 pandemic, among other factors.

Any development and capital raising efforts in China may

include a joint venture in relation to our Hong Kong subsidiary, and would also involve a number of commercial variables, including rights

and obligations pertaining to licensing, development and financing, among others.

Our failure to receive or obtain such clearances or

approvals on a timely basis or at all, whether that be in the U.S., China or otherwise, would have an adverse effect on our results of

We were incorporated and commenced operations on November 1, 2013 as

a result of a spin-off from Harvard Bioscience, Inc.

(Harvard Bioscience).

On that date, we became an independent company

that operates the regenerative medicine business previously owned by Harvard Bioscience.

The spin-off was completed through the

distribution of all the shares of common stock of Biostage to Harvard Bioscience stockholders.

Since our incorporation, we have devoted substantially all of

our resources to developing our programs, building our intellectual property portfolio, business planning, raising capital and

providing general and administrative support for these operations.

To date, we have financed our operations with proceeds from

the sales of common stock and preferred stock.

In December 2017, we sold the inventory and rights to manufacture and sell research-only

versions of our bioreactors to Harvard Bioscience.

We did not recognize any revenues from research bioreactors during the years

ended December 31, 2019 and December 31, 2018.

We expect to continue to incur operating losses and negative

cash flows from operations for 2020 and in future years.

On that date, we became an independent company that operates

the regenerative medicine business previously owned by Harvard Bioscience.

The spin-off was completed through the distribution of all

the shares of common stock of Biostage to Harvard Bioscience stockholders.

Since our incorporation, we have devoted substantially all of our resources

to developing our programs, building our intellectual property portfolio, business planning, raising capital and providing general and

administrative support for these operations.

To date, we have financed our operations with proceeds from the sales of common stock and

preferred stock.

In December 2017, we sold the inventory and rights to manufacture and sell research-only versions of our bioreactors

to Harvard Bioscience.

We did not recognize any revenues during the years ended December 31, 2020 and December 31, 2019.

Our products are currently in development and have not yet received

regulatory approval for sale anywhere in the world.

We have incurred substantial operating losses since our inception,

and as of December 31, 2020 had an accumulated deficit of approximately $69.0 million and will require additional financing to fund future

We expect that our operating cash on-hand as of December 31, 2020 of approximately $1.0 million, along with proceeds of approximately

$0.2 million during the first quarter of 2021 from the receipt of Phase II of the SBIR grant will enable us to fund our operating expenses

and capital expenditure requirements into June of 2021.

We expect to continue to incur operating losses and negative cash flows from operations

for 2021 and in future years.

Therefore, as disclosed in Note 1 to our consolidated financial statements, these conditions raise substantial

doubt about our ability to continue as a going concern.

We will need to raise additional funds to fund our operations.

event we do not raise additional capital from outside sources in the second quarter, we may be forced to curtail or cease its operations.

Cash requirements and cash resource needs will vary significantly depending upon the timing of the financial and other resource needs

that will be required to complete ongoing development, pre-clinical and clinical testing of products, as well as regulatory efforts and

collaborative arrangements necessary for our products that are currently under development.

We are currently seeking and will continue

to seek financings from other existing and/or new investors to raise necessary funds through a combination of public or private equity

We may also pursue debt financings, other financing mechanisms, research grants, or strategic collaborations and licensing

arrangements.

We may not be able to obtain additional financing on favorable terms, if at all.

Our operations will be adversely affected if it is unable to raise

or obtain needed funding and may materially affect our ability to continue as a going concern.

Our consolidated financial statements have

been prepared assuming that we will continue as a going concern and therefore, the consolidated financial statements do not include any

adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications

of liabilities that may result from the outcome of this uncertainty.

2020 Financing Activities

During 2020 we completed the following financing activities:

On January 3, 2018, we issued 50,000 shares of common stock at $2.00 per share and warrants to purchase 75,000 shares of common

stock at an exercise price of $2.00 per share, in exchange for aggregate gross proceeds of $100,000 in an unregistered private

placement with Connecticut Children’s Medical Center (Connecticut Children’s).

The warrants were immediately exercisable

and expire in January 2023.

Connecticut Children’s Chief Executive Officer, James Shmerling, is a member of our Board of

Directors as well as the Board of Directors of Connecticut Children’s.

On February 20, 2018, we completed a private placement of 302,115 shares of common stock at a purchase price of $3.31 per share

for gross and net proceeds of $1.0 million.

On May 29, 2018, we issued 1,000,000 shares of common stock to two new investors at a purchase price of $3.60 per share for

aggregate gross and net proceeds of approximately $3.6 million and $3.4 million, respectively, in an unregistered private placement

Following the issuance of these shares, the holders of Series D preferred stock exercised their right to convert all

of the 3,108 shares outstanding of Series D preferred stock into 1.554 million shares of common stock as provided for under terms

of the Series D preferred stock.

On June 29, 2018, we issued 250,000 shares of common stock to an investor at a purchase price of $3.60 per share for aggregate

gross and net proceeds of approximately $0.9 million and $0.8 million, respectively, in an unregistered private placement transaction.

During the year ended December 31, 2020, we issued a total of 151,027 and 125,000 shares, respectively, of our common stock at a purchase

prices of $3.70 and $4.00 per share, respectively, and warrants to purchase 151,027 shares of common stock at an exercise price of $3.70

per share to a group of investors for aggregate gross and net proceeds of approximately $1.1 million.

During the year ended December 31, 2020, we issued 414,000 shares of our common stock to a group of investors in connection with the

exercise of 414,000 previously issued warrants at $2.00 per share for aggregate gross and net proceeds of approximately $0.8 million.

During the year ended December 31, 2020, we issued 516,877 shares of our common stock to a group of investors in connection with the

exercise of 516,877 previously issued warrants at $3.70 per share for aggregate gross and net proceeds of approximately $1.9 million.

On May 4, 2020, we were granted a loan from the Bank of America in the aggregate amount of $0.4 million, pursuant to the Paycheck

Protection Program (PPP), established as part of the CARES Act (See Note 3 in the Consolidated Financial Statements included in Part I

“Financial Information”, Item 1 of this report for further discussion).

During the year ended December 31, 2020, we issued a total of 25,948 shares of our common stock to the former chief executive officer

and an employee due to the vesting of restricted stock units and issuance of a common stock award.

2019 Financing Activities

During 2019 we completed the following financing activities:

On June 12, 2019, we issued a total of 345,174 shares of our common stock and warrants to purchase 345,174 shares of common

stock to a group of investors at an exercise price of $3.70 per share, in exchange for aggregate gross and net proceeds of approximately

$1.3 million.

On June 12, 2019, we issued a total of 345,174 shares of our common stock and warrants to purchase 345,174 shares of common stock

to a group of investors at an exercise price of $3.70 per share, in exchange for aggregate gross and net proceeds of approximately $1.3

On December 31, 2019, we issued a total of 143,230 shares of our common stock at a purchase price of $3.70 per share and warrants

1 unchanged sentence

in the amount of $0.5 million.

During the year ended December 31, 2019, we issued 1,994,000 shares of our common stock to a group of investors in connection

with the exercise of 1,994,000 previously issued warrants at $2.00 per share for aggregate gross and net proceeds in the amount

of approximately $4.0 million.

During the year ended December 31, 2019, we issued 1,994,000 shares of our common stock to a group of investors in connection with

the exercise of 1,994,000 previously issued warrants at $2.00 per share for aggregate gross and net proceeds in the amount of approximately

$4.0 million.

Small Business Innovation Research Grant

March 28, 2018, we were awarded a Fast-Track Small Business Innovation Research (SBIR) grant by the Eunice Kennedy National Institute

of Child Health and Human Development (NICHD) to support testing of pediatric CEIs .

The award for Phase I, which was earned

over the nine months ended September 30, 2018, provided for the reimbursement of up to approximately $0.2 million of qualified

research and development costs.

On October 26, 2018, we were awarded Phase II of the SBIR grant

for $1.1 million to support development, testing, and translation to the clinic through September 2019.

The Phase II grant includes

an additional $0.5 million for future period support through September 2020, subject to availability of funding and satisfactory

progress on the project.

In December 2019, we submitted a modified Phase II grant development plan which has not yet been approved

by the NICHD.

This updated plan requests support for approximately $0.9 million.

on the above, we have the opportunity to receive up to $1.8 million total under the SBIR grant, of which $0.9 million has

been expended through December 31, 2019.

We disclosed in our Current Report on Form 8-K dated June 17,

2019 that Thomas McNaughton, our former Chief Financial Officer, resigned from his role effective June 14, 2019.

We also disclosed

in our Current Report on Form 8-K dated February 7, 2020 that James McGorry, our former Chief Executive Officer, resigned from

his role effective February 7, 2020.

On March 28, 2018, we were awarded a Fast-Track Small Business Innovation

Research (SBIR) grant by the Eunice Kennedy National Institute of Child Health and Human Development (NICHD) to support testing of pediatric

Cellspan™

Esophageal Implants (CEIs).

The award for Phase I provided for the reimbursement of approximately $0.2 million of qualified

research and development costs which was received and recognized as grant income during 2018.

On October 26, 2018, we were awarded the Phase II Fast-Track SBIR grant

from the Eunice Kennedy NICHD grant aggregating $1.1 million to support development, testing, and translation to the clinic through September

2019 and represented years one and two of the Phase II portion of the award.

On August 3, 2020, we were awarded a third year of the Phase

II grant totaling $0.5 million for support of development, testing, and translation to the clinic covering qualified expenses incurred

from October 1, 2019 through September 30, 2020.

In September of 2020, we filed and were granted a one year, no-cost extension for the

Phase II grant period extending through September 30, 2021.

For the years ended December 31, 2020 and 2019, we recognized $0.4

million and $0.5 million of grant income, respectively, from Phase II of the SBIR grant.

The aggregate SBIR grant to date provides a total

award of $1.8 million, of which, approximately $1.3 million has been recognized through December 31, 2020.

In March 2021, we received additional cash proceeds of $0.2 million

from the Phase II grant.

We disclosed in our Current Report on Form 8-K dated February 7, 2020

that James McGorry, our former Chief Executive Officer, resigned from his role effective February 7, 2020.

We also disclosed in our Current

Report on Form 8-K dated August 31, 2020 that Peter Chakoutis, our Vice President of Finance and Principal Accounting Officer, had taken

a leave of absence from his role for personal reasons effective August 24, 2020.

We disclosed in our Current Report on Form 8-K dated

October 30, 2020 that Mr.

Chakoutis would not be returning to the Company and we named Peter Pellegrino as Interim Vice President of Finance.

We are currently in the process of evaluating our options to fill these positions.

31, 2019, we had 12 employees, of whom eleven were full-time and one was part-time.

Operating Losses and Cash Requirements

We have incurred substantial operating losses since our inception,

and as of December 31, 2019 have an accumulated deficit of approximately $64.1 million and will require additional financing to

fund future operations.

We expect that our operating cash on hand at December 31, 2019 of $0.9 million, along with net proceeds

of approximately $1.0 million from the issuance of 365,027 shares of common stock during the first quarter of 2020, will enable

us to fund our operating expenses and capital expenditure requirements through the second quarter of 2020.

Based on the removal

of clinical hold by the FDA from our CEI product candidate, we are evaluating the timing and level of cash needs needed to fund

our transition to a clinical stage organization, including efforts and the time it will take to select a clinical research organization,

perform clinical readiness, site selection, and other clinical trial readiness.

We are also evaluating the potential impact of

the coronavirus pandemic on our study timelines and costs.

As discussed in Note 1 to the consolidated financial statements, these

conditions raise substantial doubt about our ability to continue as a going concern.

We are currently investing significant resources in development

of products for use by clinicians in the field of regenerative medicine.

We will need to raise additional funds in future periods

to fund our operations.

In the event that we do not raise additional capital from outside sources, we may be forced to further

curtail or cease our operations.

Cash requirements and cash resource needs will vary significantly depending upon the timing of

clinical and animal studies and other resource needs that will be required to complete ongoing development and pre-clinical and

clinical testing of products, as well as related regulatory efforts and collaborative arrangements necessary for our product candidates

that are currently under development.

We are currently seeking and continue to seek financings from existing and/or new investors

to raise necessary funds through a combination of public or private equity offerings.

We may also pursue debt financings, other

financing mechanisms, or strategic collaborations and licensing arrangements.

We may not be able to obtain additional financing

on terms favorable to us, if at all.

As of December 31, 2020, we had 7 employees, 6 of whom were full-time

and one part-time.

Components of Operating Loss

and Development Expense .

Research and development expense consists of salaries and related expenses, including share-based

compensation, for personnel and contracted consultants and various materials and other costs to develop our new products, primarily:

synthetic scaffolds, including investigation and development of materials and investigation and optimization of cellularization,

autoseeders, and 3D bioreactors, as well as studies of cells and cell behavior.

Other research and development expenses include

the costs of outside service providers and material costs for prototype and test units and outside laboratories and testing facilities

performing cell growth and materials experiments, as well as the costs of all other preclinical research and testing including

animal studies and expenses related to potential patents.

We expense research and development costs as incurred.

General and Administrative Expense .

Selling, general and administrative expense consists primarily of salaries and other

related expenses, including share-based compensation, for personnel in executive, accounting, information technology and human

resources roles.

Other costs include professional fees for legal and accounting services, insurance, investor relations and facility

Research and Development Expense .

and development expense consists of salaries and related expenses, including share-based compensation, for personnel and contracted consultants

and various materials and other costs to develop our new products, primarily:

synthetic scaffolds, including investigation and development

of materials and investigation and optimization of cellularization, autoseeders, and 3D bioreactors, as well as studies of cells and cell

Other research and development expenses include the costs of outside service providers and material costs for prototype and

test units and outside laboratories and testing facilities performing cell growth and materials experiments, as well as the costs of all

other preclinical research and testing including animal studies and expenses related to potential patents.

We expense research and development

costs as incurred.

Selling, General and Administrative Expense .

Selling, general and administrative expense consists primarily of salaries and other related expenses, including share-based compensation,

for personnel in executive, accounting, information technology and human resources roles.

Other costs include professional fees for legal

and accounting services, insurance, investor relations and facility costs.

Other Income (Expense)

Grant income reflects income earned under the SBIR grant.

Grant income is recognized based on timing of when

qualified research and development costs are incurred.

in Fair Value of Warrant Liability.

Changes in fair value of warrant liability represent the change in the fair value

of common stock warrants classified as liability awards during the years ended December 31, 2019 and 2018.

We use the Black-Scholes

pricing model to value the related warrant liability.

The costs associated with the issuance of the warrants have been recorded

as an expense upon issuance.

Other expense represents a loss on disposal of equipment during the year ended December 31, 2018.

Grant Income.

Grant income reflects income earned under the

Grant income is recognized based on timing of when qualified research and development costs are incurred.

Changes in Fair Value of Warrant Liability.

Changes in fair value of warrant liability represent the change in the fair value of common stock warrants classified as liability awards

during the years ended December 31, 2020 and 2019.

We use the Black-Scholes pricing model to value the related warrant liability.

costs associated with the issuance of the warrants have been recorded as an expense upon issuance.

Critical Accounting Estimates

Management’s discussion and analysis of our financial

condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with

Generally Accepted Accounting Principles in the United States (U.S.

The preparation of these consolidated financial statements

requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures.

We believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Management’s discussion and analysis of our financial condition

and results of operations is based on our consolidated financial statements, which have been prepared in accordance with Generally Accepted

Accounting Principles in the United States (U.S.

The preparation of these consolidated financial statements requires us to make

estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures.

We believe the

following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Share-based Compensation

We account for our share-based compensation in accordance with

the fair value recognition provisions of current authoritative guidance.

Share-based awards, including stock options, are measured

at fair value as of the grant date and recognized as expense over the requisite service period (generally the vesting period),

which we have elected to amortize on a straight-line basis.

Expense on share-based awards for which vesting is performance or milestone

based is recognized on a straight-line basis from the date when we determine the achievement of the milestone is probable to the

vesting/milestone achievement date.

Since share-based compensation expense is based on awards ultimately expected to vest, it has

been reduced by an estimate for future forfeitures.

We estimate forfeitures at the time of grant and revise our estimate, if necessary,

in subsequent periods.

We account for our share-based compensation in accordance with the

fair value recognition provisions of current authoritative guidance.

Share-based awards, including stock options, are measured at fair

value as of the grant date and recognized as expense over the requisite service period (generally the vesting period), which we have elected

to amortize on a straight-line basis.

Expense on share-based awards for which vesting is performance or milestone based is recognized

on a straight-line basis from the date when we determine the achievement of the milestone is probable to the vesting/milestone achievement

We estimate the fair value of options granted using the Black-Scholes option valuation model.

judgment is required in determining the proper assumptions used in these models.

The assumptions used include the risk-free interest

rate, expected term, expected volatility and expected dividend yield.

We base our assumptions on historical data when available

or, when not available, on a peer group of companies.

However, these assumptions consist of estimates of future market conditions,

which are inherently uncertain and subject to our judgment, and therefore any changes in assumptions could significantly impact

the future grant date fair value of share-based awards.

Significant judgment is required in

determining the proper assumptions used in these models.

The assumptions used include the risk-free interest rate, expected term, expected

volatility and expected dividend yield.

We base our assumptions on historical data when available or, when not available, on a peer group

of companies.

However, these assumptions consist of estimates of future market conditions, which are inherently uncertain and subject

to our judgment, and therefore any changes in assumptions could significantly impact the future grant date fair value of share-based awards.

Total share-based compensation expense for the years ended December

31, 2020 and 2019 was $1.1 million and $1.7 million, respectively.

Share-based compensation is further described in Note 14 to

our consolidated financial statements.

Share-based compensation is further described in Note 15 to our consolidated

financial statements.

Warrant Liability

Most of the warrants to purchase shares of our common stock

have been classified on our consolidated balance sheets as equity.

We classify warrants as a liability in our consolidated balance

sheets if the warrant is a free-standing financial instrument that may require us to transfer cash consideration upon exercise

and that cash transfer event would be out of our control.

Most of the warrants to purchase shares of our common stock have been

classified on our consolidated balance sheets as equity.

We classify warrants as a liability in our consolidated balance sheets if the

warrant is a free-standing financial instrument that may require us to transfer cash consideration upon exercise and that cash transfer

event would be out of our control.

Such a “liability warrant”

is initially recorded at fair

value on the date of grant using the Black-Scholes model, net of issuance costs, and it is subsequently re-measured to fair value

at each subsequent balance sheet date.

Changes in fair value of the warrant are recognized as a component of other income (expense)

in the consolidated statements of operations.

We will continue to adjust the liability for changes in fair value until the earlier

of the exercise or expiration of the warrant.

is initially recorded at fair value on the date of grant using

the Black-Scholes model, net of issuance costs, and it is subsequently re-measured to fair value at each subsequent balance sheet date.

Changes in fair value of the warrant are recognized as a component of other income (expense) in the consolidated statements of operations.

We will continue to adjust the liability for changes in fair value until the earlier of the exercise or expiration of the warrant.

The following table summarizes the results of our operations for the

years ended December 31, 2020 and 2019 ($ in thousands):

For the Year Ended

Change 2020 vs.

Operating expenses

Research and development

Selling, general and administrative

Total operating expenses

Other income (expense)

Change in fair value of warrant liability

Other income (expense), net

nm = not meaningful

Results of Operations

1 unchanged sentence

Research and Development Expense

Research and development expense increased approximately $1.0

million, or approximately 24%, to $4.9 million for the year ended December 31, 2019 compared to $3.9 million for the year ended

December 31, 2018.

This was due primarily to an increase of $0.4 million in consulting expenses related to IND preparation, a $0.3

million increase in payroll-related costs attributed to the hiring of additional research professionals in 2018, and a $0.3 million

increase in share-based compensation, offset in part by a $0.1 million decrease in other operating expenses.

With the filing of

our IND on October 29, 2019, we expect our research and development costs to increase significantly in 2020 due to the start of

a clinical trial activities based on approval of our IND by the FDA and to the extent we have funds available.

Research and development expense decreased approximately $2.8 million,

or approximately 57%, to $2.1 million for the year ended December 31, 2020 as compared to $4.9 million for the year ended December 31,

This was due primarily to $1.1 million of lower outsourced study costs and lab operating supplies, a $0.8 million decrease in regulatory

consulting expenses, $0.8 million of lower employee and share-based compensation expenses, and a $0.2 million decrease in all other expenses.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $0.1 million,

or approximately 2%, to $4.0 million for the year ended December 31, 2019 compared to $3.9 million for the year ended December

This was due primarily to a $0.6 million increase in share-based compensation mainly due to option grants issued to our

Board of Directors and the separation of our Chief Financial Officer in June 2019.

This increase was partially offset by $0.2 million

of lower business exit taxes mainly related to the dissolution of European operations, $0.2 million of lower cash-based Board of

Director compensation, and a $0.1 million reduction in all other expenses.

Selling, general and administrative expense decreased approximately

$0.7 million, or approximately 19%, to $3.3 million for the year ended December 31, 2020 compared to $4.0 million for the year ended December

This decrease was due primarily to $0.9 million of lower employee and share-based expenses due to the separations of our former

chief executive officer and chief financial officer partially offset by $0.2 million increase to consulting fees to support public company

requirements.

For the year ended December 31, 2020 we recorded grant income of $0.4

million for qualified expenditures under the SBIR grant for the period October 1, 2019 to September 30, 2020.

In September of 2020, we

filed and were granted a one year, no-cost extension for the Phase II grant period extending through September 30, 2021.

ended December 31, 2019 we recorded grant income of $0.5 million for qualified expenditures under the SBIR grant.

Change in Fair Value of Warrant Liability

During the year ended December 31, 2019, the change in fair

value of our warrant liability was income of $0.1 million due primarily to a lower volatility of the underlying common shares and

a decrease in the expected term.

This compared to expense of $0.1 million for the year ended December 31, 2018 due primarily to

an increase in price and volatility of the underlying common shares.

Other Expense

During the year ended December 31, 2019 there was no other expense

incurred, compared to a loss on the disposal of equipment of approximately $7,000 during the year ended December 31, 2018.

For the year ended December 31, 2020, the change in fair value of our

warrant liability resulted in other income of $16,000 due primarily to a lower stock price of the underlying common shares during the

This compared to other income of $65,000 for the year ended December 31, 2019 due primarily to a lower volatility of the underlying

common shares and a decrease in the expected term.

Liquidity and Capital Resources

of Liquidity.

We have incurred operating losses since inception, and as of December 31, 2019 we had an accumulated deficit

of approximately $64.1 million.

We are currently investing significant resources in the development and commercialization of our

products for use by clinicians and researchers in the field of regenerative medicine.

As a result, we expect to incur operating

losses and negative operating cash flow for the foreseeable future.

Net cash used in operating activities of $6.1 million for the year ended December 31, 2019 was primarily

a result of our net loss of $8.3 million, partially offset by $1.8 million non-cash expenses related to share-based compensation

and depreciation, and $0.4 million of cash provided from working capital due to the timing of prepaid expenses and accounts payable.

Net cash used in operating activities of $7.6 million for the

year ended December 31, 2018 was primarily a result of our $7.5 million net loss and $1.2 million of cash used for working capital

representing the payment of accounts payable and the timing of prepaid expenses, offset in part by $1.1 million add-back of non-cash

expenses related to the change in the fair value of our warrant liability, share-based compensation and depreciation.

Net cash used in investing activities for the years ended December 31, 2019 and 2018 totaled $129,000

and $67,000, respectively, and represented additions to property, plant and equipment, which in the case for 2018 were partially

offset by proceeds from the sale of certain property, plant and equipment.

Net cash generated from financing activities of $5.8 million during the year ended December 31, 2019 consisted

of $1.8 million of net proceeds received from private placement transactions and $4.0 million received from the exercise of warrants.

Net cash generated from financing activities of $5.0 million

during the year ended December 31, 2018 consisted of net proceeds in the amount of $5.3 million received from private placement

transactions that resulted in the issuance of 1.6 million shares of our common stock at an average purchase gross price of $3.495

per share, partially offset by the repayment of a $0.3 million deposit to an investor related to the private placement transaction

from December 2017.

We continue to pursue our esophageal program, including advancing

to operate as a clinical stage company, which we anticipate will increase our future expenditures.

We do not expect our 2020 expenditures

to be significantly higher than those in 2019 due to the timing of the removal of clinical hold status by the FDA on our CEI product

candidate, in addition to the time it will take to select a clinical research organization, perform clinical readiness, site selection,

and other clinical trial readiness.

Sources of Liquidity.

We have incurred operating losses since

inception, and as of December 31, 2020 we had an accumulated deficit of approximately $69.0 million.

We are currently investing significant

resources in the development and commercialization of our products for use by clinicians and researchers in the field of regenerative

As a result, we expect to incur operating losses and negative operating cash flow for the foreseeable future.

Operating Activities.

Net cash used in operating activities

of $4.0 million for the year ended December 31, 2020 was primarily a result of our net loss of $4.9 million, offset by $1.3 million of

non-cash expenses related to share-based compensation and depreciation, and increased by $0.4 million of cash provided from working capital

due to the timing of prepaid expenses and accounts payable.

Net cash used in operating activities of $6.1 million for the year

ended December 31, 2019 was primarily a result of our net loss of $8.3 million, partially offset by $1.8 million of non-cash expenses

related to share-based compensation and depreciation, and $0.4 million of cash provided from working capital due to the timing of prepaid

expenses and accounts payable.

Investing Activities.

Net cash used in investing activities

for the years ended December 31, 2020 and 2019 totaled $7,000 and $129,000, respectively, and represented purchases of property, plant

and equipment.

Financing Activities.

Net cash generated from financing activities

of $4.2 million during the year ended December 31, 2020 consisted of $1.1 million of net proceeds received from private placement transactions

that resulted in the issuance of 276,027 shares of our common stock and warrants to purchase 151,027 shares of common stock to a group

of investors at exercise prices of $3.70 and $4.00 per share, respectively, $2.7 million received from the issuance of 930,877 shares

of our common stock to a group of investors in connection with previously issued warrants, and $0.4 million received under the paycheck

protection program loan.

Net cash generated from financing activities of $5.8 million during

the year ended December 31, 2019 consisted of $1.8 million of net proceeds received from private placement transactions and $4.0 million

received from the exercise of warrants.

We continue to pursue our esophageal program, including advancing to

operate as a clinical stage company.

Given our current limited cash resources, we intend to closely monitor our cash expenses as such

cash resources are expected to only allow us to meet our operating needs into June of 2021.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that

may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements

appearing at the end of this Annual Report on Form 10-K.

A description of recently issued accounting pronouncements that may

potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing

at the end of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not

currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

We did not have, during the periods presented, and we do not currently

have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

Quantitative and Qualitative Disclosures about Market Risk.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity